Exhibit 31-3

-Refer to Exhibit 31-3.Suppose that Firms A,B,and C are the only polluters in the state and that each emits 4 tons of pollution into the atmosphere.To cut the level of pollution in half the government issues two transferable pollution permits to each firm. What is the total cost to society of decreasing pollution to half its present level if firm C buys one pollution permit from firm A and one pollution permit from firm B?

Question

Exhibit 31-3
 
-Refer to Exhibit 31-3.Suppose that Firms A,B,and C are the only polluters in the state and that each emits 4 tons of pollution into the atmosphere.To cut the level of pollution in half the government issues two transferable pollution permits to each firm. What is the total cost to society of decreasing pollution to half its present level if firm C buys one pollution permit from firm A and one pollution permit from firm B?

Quizplus · Accepted Answer

The total cost to society is the sum of the costs to each firm. Firm A sells two permits for $250 each, so its cost is -$500. Firm B sells one permit for $250, so its cost is -$250. Firm C buys two permits for $250 each, so its cost is $500. The total cost to society is -$500 + -$250 + $500 = -$250.

Exhibit 31-3 -Refer to Exhibit 31-3.Suppose That Firms A,B,and C Are the A,B,and